Softworks Blog

McDonald’s is the latest large corporation to face an unpaid overtime lawsuit. McDonald's workers in three US states - New York, California and Michigan - have filed cases against the firm alleging it was "stealing" wages. Earlier this month disgruntled employees protested in McDonalds in Midtown Manhattan chanting for overtime wages they say are owed to them.

The seven lawsuits contend that employees of McDonald’s and its franchisees were forced to work off the clock and through breaks, cutting hours and dollars off their pay checks — and in some cases pushing wages below the $7.25 hourly federal minimum.

There is a growing body of case law involving class action lawsuits for unpaid overtime in the US. Already lawsuits have been filed against many high profile organizations including; Best Buy, Urban Outfitters, Apple, AT&T, Bank of America, CVS and Wells Fargo among others, alleging employers misclassified employees as exempt from overtime or failed to pay overtime to employees regardless of their classification.

This is not just an issue in the US, this is a global issue. Last year in Canada, Ontario’s Superior Court of Justice gave the green light to a class-action lawsuit against part of Bank of Montreal’s wealth management group that alleges the bank owes unpaid overtime to hundreds of current and former investment advisers. The lawsuit alleges BMO Nesbitt Burns Inc. did not keep a proper record of the time employees worked and did not appropriately compensate employees when they worked overtime.

The case followed other lawsuits over unpaid overtime brought against Canadian Imperial Bank of Commerce and the Bank of Nova Scotia by bank tellers and other employees who say they have been unfairly denied overtime pay. The banks are looking at combined claims of $950 Million.

In the UK John Lewis had to spend £40m to compensate staff who were accidentally underpaid for working Sundays and Bank Holidays over a seven year period.

Wherever you employ staff, ensuring legislative compliance and managing, recording and tracking working hours has never been more important. A good Time & Attendance Solution can automate this process for you and ensure that your organization is always 100% compliant.

I started my career in workforce management over 20 years ago, specifically in time & attendance. Initially, I worked for a company that built mechanical time clocks that added up the daily and weekly hours on timecards. My employer hadn’t yet gotten to a PC based solution. This is what time & attendance solutions were all about in those days. We sold them based on the fact that we could eliminate about 80% of the manual effort of adding up timecards along with the 1-3% error rate typically made during this manual process.

As far as time & attendance solutions went, these were seen as the two key benefits. They are still key benefits of a T&A solution, however back then employers viewed these devices purely as a way to save money. Compliance was not typically a part of the conversation.

Let’s step back and look at the origins of employment compliance. While many people in the 1800s were talking about an 8 hour work day, it was only being adopted in a few rare situations, such as the tradesmen in New Zealand during a building boom, or the ship builders in Boston in the 1840s when the shipping industry was taking off. The first major industrialist that instituted the 8 hour work day was Henry Ford on January 5, 1914. 100 years ago. At the same time, he more than doubled the daily pay of his workforce from $2.34 to $5 per day He believed that is was good for the employee, the company, and the economy. He was right. In 1926 he changed from a six day work week to 5 days, making Saturdays a day off. When it became obvious to other industrialists that this was working well for Ford and Ford’s profits were soaring, others started following this trend. Hence, the US Federal government made the 8 hour work day/40 work week law with the Federal Labor Standards Act in 1938. Soon after that, other nations began passing their own legislation regarding employment rules and regulations.

Today, legislative compliance may be the most important benefit that a T&A solution can deliver for some employers. This is especially true in “White Collar” businesses such as financial institutions, insurance companies, and other organizations with a lot of office staff. In the past, these organizations shied away from T&A systems because of the association with time clocks. Theirs was not a clocking culture. But today’s solutions offer many alternatives to time clocks, allowing a T&A solution to automate the time and attendance process for all employees in all corporate cultures. In regard to compliance, if you were to search the internet for Class Action Over Time Lawsuits, then add a letter in front of it like “A”, you will start finding very familiar names of companies that thought they were 100% compliant and then lost their multi-million dollar lawsuits. Companies like AT&T, Bank of America, CVS, Deloitte, Farmers Insurance, PWC, and Wells Fargo.

Compliance with government rules and regulations is an international issue. In the United Stated the rules are defined by the FLSA (Fair Labor Standards Act), in Canada it’s the ESA (Employment Standards Act), and in Europe it’s the WTD (Working Time Directive). However, compliance is not limited to large industrialized nations. I attended the Global Credit Union Conference last year in Ottawa. I found it interesting speaking about compliance issues with employers from Kenya, Ghana, Barbados, Tonga, and many other small nations around the world. Wherever you have employees, you have compliance issues to take into account.

One reason I often hear from some companies for not having an automated T&A system in place, is because it didn’t make the budget cut this year, again. Most T&A solutions still deliver the cost savings of replacing manual processes involved with time sheets or cards. Generally these solutions will pay for themselves in less than a year. For those employers that feel their manual system is adequate, they need to ask themselves what is the potential cost of not being compliant. The answer is it can be millions. I doubt if that number is anywhere in their annual budget. Why would any organization leave themselves open to the expense and negative publicity generated by not being compliant, especially when the solution will pay for itself in months?

John Lewis are to spend £40m to compensate staff who were accidentally underpaid for working Sundays and Bank Holidays during the past seven years.They will make a one-off payment to staff reflecting the amount due dated back to 2006.

Following a review of their Partnership's holiday pay policy it became clear that Partners who receive certain additions to pay, such as premiums for working on Sunday or bank holidays, had not been paid correctly under the Working Time Regulations legislation. The Partnership Board therefore decided to make one-off additional payments to those affected.

About 69,000 employees from its department stores and Waitrose supermarkets are set to receive individual payments ranging from a few pounds to about £4,000, accounting for more than 80 per cent of its 85,000 workforce.The cost to the Partnership of these repayments and associated expenses will be around £40 million. This one-off cost will be reported in their half-year results in September. However, it will not be deducted from this year's Partnership Bonus pool. They expect future pensions liabilities to increase by approximately £7m as a result.

Tracey Killen, Director of Personnel, had this to say:

“As soon as we established that we were not implementing the Working Time Regulations correctly, we worked quickly to make the repayments to our Partners in a way that is both fair and responsible.”

The John Lewis Partnership operates 39 John Lewis stores across the UK as well as 295 Waitrose shops and has annual gross sales of more than £9.5 billion.

I think this story reflects just how challenging implementing working time regulations and ensuring compliance can be even for some of the most respected and admired large organisations.

It also highlights just how high the costs can be - in this case a whopping £40 million. Not great PR either. We are still amazed, when we come across companies using manual systems to track this type of critical information. With automated Time and Attendance solutions, monitoring WTD compliance couldn’t be easier. We work with all sorts of companies some using our “Honour Based Attendance Tracking”, designed specifically for organisations where the culture is not to clock, and others our simple “Web Based In & Out clocks”.

You can get more about the working time directive and our automated solutions here